SpaceX’s efforts to finalize a $40 billion off-balance-sheet debt structure for its artificial intelligence buildout have been roiled by recent market turmoil that’s driven up sector-wide borrowing costs and complicated price talks.

The transaction under discussion is designed to fund the purchase of Nvidia Corp.’s chips through a special purpose vehicle, keeping the liabilities off SpaceX’s own books and safeguarding its investment-grade ratings, according to people familiar with the matter.

Bankers led by Goldman Sachs Group Inc. are discussing the structure with investors led by Apollo Global Management Inc., with Apollo-backed Atlas SP slated to manage the entity, the people said, asking not to be identified discussing private information. Pacific Investment Management Co. is also weighing investing, according to the people. While pricing discussions are ongoing, finding levels that both sides can agree on has become complicated by anxiety that has rippled through credit markets in recent days, the people said.

Credit investors are increasingly concerned over the massive debt burdens being accumulated to fund AI investments — fueling a selloff in AI stocks, widening corporate bond spreads and sending credit risk gauges flashing.

Discussions in recent weeks had placed a subordinated portion of the debt in the mid 8% yield range, though the recent volatility has taken investors back to the drawing board, the people said.

Representatives for SpaceX and Atlas didn’t respond to requests for comment, while representatives for Goldman, Apollo and Pimco declined to comment.

With the latest structure, SpaceX could avoid a repeat of a financing attempt last year by Elon Musk’s AI startup, xAI. In that deal, an entity sought as much as $20 billion of off-balance sheet debt through a sale-leaseback agreement with Valor Equity Partners, a longtime ally of Musk.

But SpaceX ultimately had to record about $13 billion of that debt as its own after auditors declared it a “failed sale-leaseback arrangement,” according to SpaceX’s earnings report this week.

Under the proposed transaction, bankers advising SpaceX are seeking the SPV structure given that the company’s debt is rated just a few notches from junk and its existing bonds trade at speculative-grade levels. Goldman may also take on some of the debt, according to the people.

The debt package is expected to be issued in three tranches of so-called 144a bonds, a private placement structure that’s become common in fundraising for general processing units, or chips.

A subordinated tranche will range between $25 billion and $30 billion and the other two tranches will be $10 billion and as much as $5 billion, the people said. Initial discussions had placed the debt at spreads ranging from 230 basis points over benchmarks for some of the borrowings to more than 300 basis points, they said.

The latest transaction follows a strong third quarter earnings, where SpaceX’s AI unit turned a profit for the first time. The enterprise is increasingly driving revenue by selling computing power from its Memphis data centers to external AI labs and hyperscalers.

Adding to SpaceX’s large debt load could pressure its ratings just as demands for capital for data centers and chips intensify. During SpaceX’s earnings call Tuesday, Chief Financial Officer Bret Johnsen indicated the borrowing will continue, citing discussions with a number of available pools of debt capital.

“We have a lot of conviction that we are going to be able to do this in a very measured fashion and continue to keep ourselves in that IG status along the way,” he said.

For Apollo, the deal follows a string of major AI financings. The structure is expected to take a similar approach to a jumbo deal Apollo led earlier this year which enabled Anthropic PBC to buy chips from Broadcom Inc.

In that version, the asset manager used its Atlas unit to raise capital and keep the debt off Broadcom’s balance sheet, while still carrying a guarantee from the blue-chip company. Apollo said the deal was its most complex to date.